One of the most common questions that we are asked is “how much can we get in rental returns a year from a property”.
There is no simple answer to this question because a short term vacation rental is, if you like, a small business. And like any business the success very much depends on the owner and the employees. In the case of a short term rental property that would be you and your property management company.
The first question that needs to be answered to begin to make a determination of the annual returns are, who are you and who is your property management company going to be?
It is very possible to have two identical houses side by side – one that generates 12 weeks at $150 a night and another that generates 32 weeks at $250 a night. That is not theoretical, that is happening right now – all over the Orlando short term rental area, tens of thousands of homes that are in a STR program generate different annual returns and those returns are more dependent on the owner and the property management company than the house or the location.
To demonstrate this in a very easy and understandable way lets take two homes, the Smiths and the Jones.
The Smiths purchased a 5 bedroom house in the Sunshine state resort, it was already furnished and with a property management company. They took the property over as a turn key operation and continued to run it as it was.
The Jones purchased a 5 bedroom house in the Sunshine state resort, it was already furnished and with a property management company. They took the property over as a turn key operation and continued to run it as it was but spent $300 getting the property photographed property by a professional indoor photographer and gave the home a makeover.
You are a renter and it’s your vacation.
You are looking for a 5 bedroom vacation home for your family in the Sunshine state resort and you come across the Smiths and the Jones property and the whole family is looking at both options you you look at the photographs to both homes.
The SMITHS Property
The JONES Property
90 times out of 100 vacationers are going to book the Jones house. Jones spent some money getting good photographs taken and freshened up the house.
The only way Smith is going to get a booking is if he drops his price lower than Jones, and Jones is so overbooked he has to raise his prices.Well by rule of thumb a nice property in a nice location with a good owner and a good property management company should be able to secure you at least 26 weeks of bookings a year – or 50% occupancy.
The rate is very much dependent on the location and the property management company – and of course how nice the home is which brings us back to the question of Smith and Jones and who you are most like as an owner.